Headcount stays the same

Labour & European Law ReviewWeekly Issue 28002 August 2012

The law sets out a number of specific circumstances in which redundancies can occur, but what happens when the overall number of employees has not reduced? The Employment Appeal Tribunal (EAT) said in Packman t/a Packman Lucas Associates v Fauchon that there can still be a redundancy even if the overall employee headcount did not diminish.

Basic facts

Ms Fauchon worked mainly for her employer as a book-keeper. There was a downturn in business and in addition, the company had introduced an accountancy software package which meant that it did not require so many book-keeping hours.

It tried to persuade Ms Fauchon to cut back on her hours, but she refused. Because her contract entitled her to work the hours she was doing and the company no longer needed her to work those hours, it gave her notice of dismissal which took effect on 20 October 2010.

She claimed that she had been dismissed by reason of redundancy and was therefore entitled to a redundancy payment. The employer argued that she could not be redundant as there had been no reduction in the overall headcount (Ms Fauchon was still working for the company but on reduced hours).

Tribunal decision

The Tribunal upheld her claim of redundancy because the downturn in the business meant that the company needed fewer book-keeping hours.

As she had not agreed to a reduction in her hours, she had been dismissed and was therefore entitled to a redundancy payment of £11,210.

In coming to this decision, the Tribunal rejected the EAT decision in Aylward v Glamorgan Holiday Home Ltd which found that if there was no reduction in the number of employees required, there could not be a redundancy. The company appealed, arguing that the Tribunal was bound by the decision in Aylward.

Relevant law

Section 139(1) states that:

“For the purposes of this Act, an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:

... (b) the fact that the requirements of that business -

(i) for employees to carry out work of a particular kind [...] have ceased or diminished or are expected to cease or diminish.”

EAT decision

But the EAT dismissed the appeal, saying that the first point of reference needed to be the appropriate section of the relevant statute, “applying the words but missing out none.”

It was clear that there had been a dismissal but the question was whether it was “wholly or mainly attributable – that is, caused by – the state of affairs set out in subsection (1)(b)”?

This meant looking at the needs of the business and whether its need for work of a particular kind had diminished. In other words, whether “less work of that sort needs to be done”. If so, “there will be a redundancy situation, bearing in mind the need to give value to each word in the statutory section.”

That was clearly the case here, which meant that Ms Fauchon had been made redundant.

The EAT said it was unable to follow the decision in Aylward and dismissed the appeal.